Plaintiff Artists Rights Enforcement Corp. (AREC) seeks (1) partial summary judgment on its first cause of action for breach of contract against defendants as to liability for failure to [*2]pay royalties since 2010, in violation of the parties' settlement agreements; (2) partial summary judgment on damages in the amount of $675,541.44, representing $451,827.20, in unpaid domestic royalties, plus $223,714.34 in pre-judgment interest; and (3) upon grant of partial summary judgment on liability, an award of reasonable attorney fees pursuant to the parties' settlement agreements.

The late Joseph Robinson, Jr., and his brother, defendant Leland Robinson, through a number of shell entities wholly owned by them, including defendants Sugar Hill Records, Ltd., Sugarhill Music Publishing, Ltd., Twenty Nine Black Music and Gambi Music, Inc. (the Sugarhill Entities), engage in the business of owning and administering copyrighted songs, licensing the use of such songs to recording companies, advertisers, producers of audio-visual programs and others, and collecting royalties and fees for such uses throughout the United States, including New York, and the world.

Between July 17, 1980 and January 28, 1981, the following songwriters, artists and music publishers entered into separate but essentially identical Exclusive Songwriters Agreements with the Sugarhill Entities' Sugar Hill Music Publishing affiliate (SMP): Melvin Glover (Glover), Eddie Morris (Morris), Nathaniel Glover, Jr., Guy Todd Williams, The Estate of Robert Keith Wiggins, Sharon Green Jackson, Keith Caesar, Kevin Smith, Rodney Stone and Reginald A. Payne (collectively, the Songwriters) (see Rubin aff, exhibit 3). The Songwriters were members of the professional groups the Furious Five, Grandmaster Melle Mel, Crash Crew, and Funky 4 Plus 1, which created musical compositions for defendants. These compositions were thereafter released on the Sugar Hill Records label.

AREC specializes in assisting artists, songwriters, and music publishers with the collection of royalties and other fees due them from the use of their artistic material and/or musical performances. Because of defendants' continued failure to pay royalties or provide royalty statements under the Exclusive Songwriters Agreements, the Songwriters each entered into letter agreements with AREC between April 15, 1999 to April 23, 2003 (Letter Agreements). The Letter Agreements permitted AREC to, among other things (1) investigate, collect and recover any and all royalties and other assets due them as recording artists and songwriters, (2) obtain an accounting for such royalties, and (3) receive all funds collected by AREC pursuant to the Letter Agreements (see Rubin aff, exhibit 4). Each Letter Agreement appointed AREC as the Songwriters' attorney-in-fact, and gave AREC an interest in the notices, statements and royalties due the Songwriters, including notices, statements and royalties due under the Exclusive Songwriters Agreements. Each Letter Agreement gave AREC a 50% share of the royalties due the Songwriters. (see Rubin aff, exhibit 4).

Beginning in 1999, AREC, on behalf of the Songwriters, asserted claims against, among others, the defendants, for unpaid royalties and other fees. In 2001, the Songwriters filed an action against Joseph Robinson, Jr., Leland Robinson, the Sugarhill Entities, other members of the Robinson family and other entities owned or controlled by the Robinsons (collectively, the Robinson Defendants) in the United States District Court for the Southern District of New York, [*3]entitled Caesar, et al. v. Sugarhill, No. 01-Civ-6180 (the Federal Action). The Federal Action sought the recovery of royalties and other fees due them as a result of their authorship of several musical compositions, as well as artist royalties in connection with the Exclusive Songwriters Agreements.

On or about June 14, 2002, the parties settled the Federal Action and a "So Ordered" settlement was entered on the record by United States District Court Judge Richard M. Berman (2002 Settlement Agreement) (see Rubin aff, exhibit 5). The 2002 Settlement Agreement required, among other things, the Robinson Defendants to pay the sum of $225,000 in nine separate installments of $25,000 each and to enter into a written settlement agreement. The Robinson Defendants made a single installment payment as required by the 2002 Settlement Agreement and failed to execute the written settlement agreement.

On March 12, 2003, a conference was held before Judge Berman during which the parties agreed, among other things: (1) to the terms of a "Rider" to the 2002 Settlement Agreement which was required to be signed within 10 days, and (2) that the parties would execute the written settlement agreement as drafted by counsel for the Songwriters. This agreement was also "So Ordered" by the court (March 12 Order) (see Rubin aff, exhibit 6). In the March 12 Order, it was agreed that the Robinson Defendants "shall deal directly and solely with AREC" (see Rubin aff, exhibit 6). Notwithstanding the March 12 Order, the Robinson Defendants did not execute the written settlement agreement. The Robinson Defendants also failed to abide by the remaining terms of the 2002 Settlement Agreement and March 12 Order, including the payment of the remaining settlement installments.

Thereafter, the Robinson Defendants engaged the services of an attorney named Randall Cutler to write a letter to AREC, purportedly on behalf of Glover and Morris, claiming that Glover and Morris wanted to withdraw from the settlement of the Federal Action. On April 15, 2003, a conference was held before Judge Berman to discuss Glover and Morris's withdrawal, however Cutler did not appear. During this conference, counsel for the Songwriters presented the court and the Robinson Defendants with declarations signed by Glover and Morris affirming that neither of them retained nor authorized Cutler to act on their behalf, nor did they consent to a withdrawal from the settlement of the Federal Action (see Rubin aff, exhibit 7).

During the April 15th conference, the parties entered into another agreement, which was "So Ordered" by the court (April 15 Order), pursuant to which Glover and Morris reaffirmed that AREC was their "irrevocably appointed authorized agent" for, among other things, the receipt of royalty reports and royalty income (see Rubin aff, exhibit 8). The April 15 Order also states that the "parties shall refrain from any conduct that would frustrate this order, the So Ordered Memorandum of March 12, 2003, the So Ordered Memorandum of June 14, 2002, the Settlement Agreement or Rider in this Action" (id.).

Despite Judge Berman's April 15 Order, the Robinson Defendants failed to sign the written settlement agreement, abide by any of its terms, or comply with Judge Berman's orders.

On May 12, 2003, AREC, as a third-party beneficiary of the settlement of the Federal [*4]Action, filed an action against the Robinson Defendants, except Leland Robinson, in the New York County Supreme Court entitled Artists Rights Enforcement Corp. v Joseph Robinson, Index No. 601495/03 (State Court Action).

On June 13, 2003, the Robinson Defendants finally executed the settlement agreement with respect to the Federal Action (Federal Action Settlement Agreement) (see Rubin aff, exhibit 9). The Federal Action Settlement Agreement required the Robinson Defendants to, among other things: (1) provide AREC with copies of all licenses issued by them for the Songwriters' musical compositions at any time from January 1, 1997 through the present; (2) provide AREC with letters of direction instructing third parties to pay directly to AREC mechanical royalties for certain compositions written by the Songwriters; (3) provide letters of direction to all performing rights societies (i.e., BMI, ASCAP and SESAC) to pay directly to AREC performance royalties for certain compositions written by the Songwriters; (4) provide letters of direction to all performing rights societies (i.e., BMI, ASCAP and SESAC) to pay directly to AREC performance royalties for certain compositions written by Songwriters; and (5) account and pay to AREC any licensing income the Robinson Defendants received from third parties due the Songwriters for compositions written by the Songwriters.

Section 6.2 of the Federal Action Settlement Agreement provided that if the Robinson Defendants collected income due the Songwriters after the agreement, that income should be paid to AREC, and the failure to do so, would result in a penalty of $5,000 in addition to what was owed (see Rubin aff, exhibit 9). Section 7.1 of the Federal Action Settlement Agreement states that "Plaintiffs warrant and represent that for all purposes herein, and for all matters related hereto, AREC is irrevocably appointed as their duly authorized representative" (id.).

Nevertheless, the Robinson Defendants refused to sign the Rider to the Federal Action Settlement Agreement, as agreed and amended by the March 12 and April 15 Orders, choosing instead to sign a modified Rider which was rejected by the Songwriters (see Rubin aff, exhibit 10). After signing the Federal Action Settlement Agreement and making the first three payments, the Robinson Defendants failed to timely remit the June 30, 2004 payment of $25,000. Accordingly, on July 14, 2004, the parties met at AREC's offices and agreed in writing that: (1) the Robinson Defendants would pay the June 30, 2004 installment payment on July 14, 2004; (2) counsel for the Songwriters would prepare a revised Rider with terms reviewed, amended and agreed to during said meeting; and (3) all of the Robinson Defendants' previously agreed to reporting and payment deadlines would be extended to September 15, 2004 (2004 Rider) (see Rubin aff, exhibit 11). Under the Federal Action Settlement Agreement, as amended by the 2004 Rider, defendants were required to make all payments directly and solely to AREC for all income received, rather than pay the Songwriters. Specifically, Paragraph 2 of the 2004 Rider provides:

"Modifying Paragraph 2.3.5 through 2.3.8 of the Agreement, the Plaintiffs agree that their designated agent, Artist Rights Enforcement Corporation ('AREC') will be responsible for receiving and distributing any payments due under the Agreement and that once said payments are received, Defendants have no further obligation or liability to Plaintiffs regarding receipt of their portion of such payment."

According to AREC, the Robinson Defendants did not comply with the terms of the 2004 Rider. Further, in direct contravention of the Federal Action Settlement Agreement, the April 15 Order and the 2004 Rider, the Robinson Defendants hired an attorney for Glover, Renata Lowenbraun, Esq. On September 21, 2004, Lowenbraun wrote a letter to the Robinson Defendants stating that Glover was withdrawing from the settlement of the Federal Action. A similar letter was also drafted for Morris. Although these letters were addressed to the Robinson Defendants and directly affected AREC's rights pursuant to the Federal Action Settlement Agreement and subsequent Riders, Glover and Morris did not provide AREC with copies of these letters. The Robinson Defendants also withheld from AREC all income due Glover and Morris and copies of all licenses issued by the Robinson Defendants concerning Glover's and Morris' musical compositions.

Because of the Robinson Defendants' failure to comply with the various orders, the 2002 Settlement Agreement, the Federal Action Settlement Agreement, and the various Riders, the State Court Action went to trial in July 2007. On July 17, 2007, the third day of trial, AREC and defendants settled that action by entering into an agreement on the record before the Honorable Helene E. Freedman (2007 Settlement Agreement) (see Rubin aff., exhibit 12). The 2007 Settlement Agreement, among other things, reaffirmed the 2002 Settlement Agreement as modified by the 2004 Rider, and required defendants to: (1) pay directly to AREC 12 semi-annual settlement payments totaling $268,000, over six years, (2) provide directly and only to AREC copies of all licenses entered into for compositions for which AREC's clients, the Songwriters, are to be paid, and (3) pay directly and only to AREC any amounts due and owing to AREC's clients (id.). Additionally, the parties agreed to further modify Paragraph 6.2 of the 2007 Settlement Agreement to require that in the event that either party receives a license request, or a royalty payment, and does not inform the other party within 15 days, the party in receipt of the license or payment shall owe the other the payment due, as well as a bonus in the amount of 20% of the amount otherwise owed.

After the 2007 Settlement Agreement was agreed to on the record, defendants complied with the terms until 2010.

On December 1, 2010, AREC and Steven Ames Brown (Brown), an attorney for the Songwriters in the State Court Action, were informed by Tracie Parry of the Rhino Entertainment Group (Rhino) that Lita Rosario, Esq. (Rosario), an attorney purporting to represent Glover and Morris, had sent a letter to Rhino demanding that all of Glover's and Morris's future royalty statements and payments be sent directly to them, not to AREC. AREC received a similar letter from Rosario.

In early 2011, Rosario also sent a letter to Sanctuary Records (Sanctuary) in the United Kingdom (a record company that remits foreign artist royalties to Glover and Morris), demanding that all of Glover's and Morris's future royalty statements and payments be sent directly to them, and not to AREC.

In July 2011, AREC discovered that a nationwide advertising campaign for DirecTV entitled "That's The Truth . . . Truth" contained the musical composition "The Message" which was co-written by Glover. On July 11, 2011, AREC sent a letter to defendants inquiring as to the status of any license agreement and/or payment that might exist for use of "The Message." (see Rubin aff, exhibit 13). In response, on August 1, 2011, defendants' counsel emailed AREC, indicating that defendants had received: (1) an August 2, 2010 letter from Glover advising that AREC no longer represented him; and (2) a November 22, 2010 letter from Rosario which stated that AREC no longer had authority to receive payments on behalf of Glover and Morris (see Rubin aff, exhibit 14). Rosario's letter further requested that all future royalty statements and payments be sent directly to her clients, and that they also be provided copies of all royalty statements and payments previously remitted to AREC (id.).

On August 2, 2011, Brown sent a letter to defendants reminding them that AREC had been appointed irrevocably as Glover's and Morris' representative, as confirmed by both Judge Berman and Justice Freedman, with the right to receive all payments and the sole authority to change payment directions (see Rubin aff, exhibit 15).

In June 2012, AREC representatives met and spoke with Glover and Morris regarding defendants' actions. At that time, Glover and Morris agreed to execute letters of direction once again directing that all royalty reports and payments be made to AREC. The letters of direction dated July 5, 2012 to, among others, Rhino and Universal Music Publishing Group (UMPG), as successor-in-interest to Sanctuary, explicitly state that all payments should be made to AREC (see Rubin aff, exhibit 16).

On July 25, 2012, AREC commenced this action seeking damages for defendants' breach of the 2007 Settlement Agreement and a declaration of the parties' rights and obligations under the various agreements between the parties and Glover and Morris. AREC also seeks an award of costs, attorneys' fees, and compensatory damages, pursuant to the various agreements herein. Issue was joined on January 10, 2013. Sugarhill Music Publishing, Ltd. commenced a third-party action against Glover and Morris seeking indemnification for the royalty payments it alleged were made directly to Glover and Morris.

On March 26, 2014, the court (Coin, J.) granted defendants' motion for a default judgment against Glover, with damages to be determined at the time of trial, and directed Morris to file his answer to the third-party complaint on or before May 9, 2014 (see Cinque aff, exhibit B).

AREC now moves for partial summary judgment, arguing that defendants have no defense for their failure to pay royalties to AREC since 2010. AREC argues that pursuant to the 2007 Settlement Agreement, defendants are obligated to pay royalties directly and solely to AREC, and that defendants cannot unilaterally choose not to do so. Therefore, AREC argues that it is entitled to partial summary judgment on its first cause of action for breach of contract as to liability for defendants' failure to pay royalties since 2010.

AREC also argues that it is entitled to partial summary judgment on the issue of damages [*5]with respect to unpaid domestic royalties. AREC contends that defendants have never provided a proper accounting of the royalties they received, despite the requirements of the settlement agreements. However, AREC has been able to obtain royalty statements from the third-party administrator of defendants' music catalogue, UMPG, for the period of July 2013 through December 2017, indicating that the royalties paid over that period equal $242,050.24. Plaintiff claims that this is the money that defendants were obligated to pay directly and solely to it under the 2007 Settlement Agreement. Using that number, AREC claims total damages due for unpaid royalties since 2010 of $451,827.10 (which includes the 20% bonus required by the 2007 Settlement Agreement), plus $223,714.34 in pre-judgment interest, for a total of $675,541.44.^[FN1]

AREC also seeks partial summary judgment on its claim that, pursuant to the various settlement agreements, it is entitled to its reasonable attorneys' fees.

Defendants oppose the motion and cross-move for summary judgment in their favor. In support of their cross motion, defendants argue that AREC is not entitled to any funds it collected because the terms of its Letter Agreements between AREC and Glover and Morris, indicate that AREC's recovery is limited to monies due their clients in their capacity as "recording artists." Defendants argue that they collected income generated from copyrights for musical compositions, not from royalties due to Glover and Morris as recording artists. Defendants argue that recording artist royalties are due to a performer who renders services on a master recording, which is a different type of royalty due to a writer of musical compositions. Therefore, since AREC can only collect recording artists payments, defendants have no obligation to pay AREC a portion of any money collected on behalf of Glover and Morris for use of their musical compositions.

Further, defendants argue that AREC's Letter Agreement with Glover is limited to collecting monies due him as the author of compositions entitled "Super Rappin" and "Super Rappin 2" (see Robinson aff, exhibit B). Therefore, since AREC is not seeking royalties for these compositions, defendants do not owe AREC any money they are authorized to collect on behalf of Glover.

Defendants also argue that by letters dated July 14, 2011 and August 2, 2010, Morris and Glove advised the Sugarhill Entities that they had terminated their agency relationship with AREC and that all royalties be paid directly to them. In these letters, Morris and Glover also agreed to indemnify defendants (see Robinson aff, exhibit C, D). In reliance on these letters, defendants paid Morris $129,253.00 and Glover $155,196.25 in royalties. Therefore, defendants do not owe AREC any royalty payments. Moreover, to the extent defendants owe AREC any royalty funds, defendants argue they are entitled to an offset for royalties already paid to Glover [*6]and Morris.

Defendants also argue that, although the 2007 Settlement Agreement and riders allow for a 20% bonus on the amount otherwise owed, this bonus provision is an unenforceable penalty and, therefore, this claim should be dismissed.

Defendants argue further AREC's motion should be held in abeyance pending the resolution of its third-party action against Glover and Morris for indemnification.

In opposition to defendants' cross motion, AREC argues that it is seeking damages for defendants' breach of the 2007 Settlement Agreement. AREC notes that it and defendants entered into the 2007 Settlement Agreement in open court at which time defendants agreed to pay royalties directly to AREC. AREC also argues that defendants performed its obligations under the 2007 Settlement Agreement from 2007 to 2010, thereby ratifying the 2007 Settlement Agreement. Therefore, AREC argues that it is entitled to summary judgment on their claims. AREC also argues that its agency with respect to Morris and Glover was irrevocable for the purposes of enforcing the settlement agreements for the Federal Action and the State Court Action. Further, both Morris and Glover reaffirmed AREC's irrevocable status in 2012, shortly before the commencement of this action.

AREC argues that the 20% bonus is enforceable as a liquidated damages provision of the contract and is not grossly out of scale with foreseeable losses.

Finally, AREC argues that defendants' third-party action against Morris and Glover is not a bar to granting it summary judgment. AREC argues that defendants' claim for indemnification against Morris and Glover is irrelevant to the determination of whether defendants breached the 2007 Settlement Agreement.

"To obtain summary judgment it is necessary that the movant establish his cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in his favor (CPLR 3212, subd [b], and he must do so by tender of evidentiary proof in admissible form. On the other hand, to defeat a motion for summary judgment the opposing party must show facts sufficient to require a trial of any issue of fact (CPLR 3212, subd. [b])." (Zuckerman v City of New York, 49 NY2d 557, 562 [1980], quoting Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1067-1068 [1979]). If the movant fails to establish entitlement to summary judgment as a matter of law, summary judgment must be denied, regardless of the sufficiency of the opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

AREC has established prima facie entitlement to summary judgment on its breach of contract claim. There is no dispute that AREC and defendants entered into the 2007 Settlement [*7]Agreement and that defendants complied with the provisions of the 2007 Settlement Agreement from 2007 to 2010. There is also no dispute that defendants stopped making payments to AREC in 2010.

In opposition, defendants argue that they do not owe AREC any payments because Morris and Glover did not agree to permit AREC to collect the fees being sought pursuant to their Letter Agreements with AREC. Further, defendants argue that in 2010 and 2011, Glover and Morris revoked their agency agreements with AREC. These arguments are without merit. There is no dispute that in the 2002 Settlement Agreement, the 2004 Rider, the Federal Action Settlement Agreement, and the 2007 Settlement Agreement, defendants agreed to pay all royalty money owned to Glover and Morris to AREC. Further, AREC's appointment as Glover's and Morris's agent for the purposes of the 2007 Settlement Agreement was irrevocable and agreed to by all parties. Moreover, there is no dispute that from 2007 to 2010, defendants did make such payments to AREC, thereby ratifying the 2007 Settlement Agreement.

Nevertheless, defendants argue that Glover and Morris terminated their agency agreement with AREC and, therefore AREC is not entitled to collect any royalty payments. It is true that as a general rule an agency for no definite term is revocable at will (see Douglas Real Estate Mgt. Corp. v Montgomery Ward & Co., 4 NY2d 33 [1958]; Production. Prods Co. v Vision Corp., 270 AD2d 922 [4th Dept 2000]; Conrad v Golden, 275 App Div 946 [2d Dept 1949]). However, when an agency is coupled with an interest, the agency is irrevocable (see Hunt v Rousmanier's Adm'rs, 21 US 174 [1823]; Matter of Jarmakowski's Estate, 169 Misc 463, 463 [Sur Ct, NY County 1938]; Ravallo v Refrigerated Holdings, Inc., 2009 WL 612490 [SD NY, Feb 25, 2009, No. 08-CV-8207 (CM)]). An agency is coupled with an interest where, as a part of the arrangement with the principal, the agent receives title to all or part of the subject matter of the agency (see 3 AmJur2d Agency § 63; Matter of Jarmakowski's Estate,169 Misc at 466; Marbury v Barnet, 17 Misc 386, 388 [Sup Ct, App Term 1896] ["[t]o make the power irrevocable, there must be an interest in the subject of the agency itself, and not a mere interest in the result of the execution of the authority"]). Words alone are not enough to establish an agency coupled with an interest (see 2A NY Jur2d, Agency § 56; Matter of Jarmakowski's Estate, 169 Misc at 466; cf. Peter Lampack Agency, Inc. v Grimes, 29 Misc 3d 1208[A][ Sup Ct, NY County 2010][ an agent who is authorized to reimburse himself out of the proceeds of the agency for advances made or expenses incurred does not have a power coupled with an interest unless he is also given a property interest in the subject matter of the power]).

Here, there is no dispute that AREC became an agent of Glover and Morris pursuant to the Letter Agreements. There is also no dispute that the Letter Agreements appointed AREC their agent for all purposes of collecting royalty statements and payments. Further, there is no dispute that pursuant to the terms of the 2002 Settlement Agreement and riders, the Federal Action Settlement Agreement, and the 2007 Settlement Agreement, it was agreed that the defendants would deal directly and solely with AREC for any matters related to the Federal Action.

Further, there is no dispute that in 2003, AREC commenced the State Court Action to enforce the 2002 Settlement Agreement, as agents for Glover and Morris, against defendants. [*8]AREC also entered into the 2007 Settlement Agreement to the State Court Action. At this point, when AREC pursued the State Court Action litigation on behalf of Morris and Glover at its own expense, its agency with Morris and Glover became coupled with an interest, and thus was irrevocable.

Notably, AREC and defendants are the only parties to the 2007 Settlement Agreement; therefore, only AREC is entitled to enforce the 2007 Settlement Agreement against defendants. Viewing the agency history between AREC and Glover and Morris including: the appointment of AREC as their agent in all matters related to the Federal Action, AREC's commencement of the State Court Action, AREC's settlement of both the Federal and State Court Actions, and AREC's commencement of this action seeking to enforce the 2007 Settlement of the State Court Action, it is established that AREC has an interest in all royalty matters related to the Federal Action. Therefore, AREC is irrevocably appointed as Morris and Glover's agent for all matters related to the royalty payments as they relate to the Federal Action. Accordingly, contrary to defendants' contentions, Morris and Glover could not revoke their agency agreement with AREC by the 2010 and 2011 letters from Rosario.

As the Southern District of New York stated in Ravallo v Refrigerated Holdings, Inc., 2009 WL 612490 at *4:

"The Restatement (Third) of Agency Section 3.12 sets forth the standard for determining whether an agency is coupled with an interest. It states:

A power given as security is a power to affect the legal relations of its creator that is created in the form of a manifestation of actual authority and held for the benefit of the holder or a third person. This power is given to protect a legal or equitable title or to secure the performance of a duty apart from any duties owed the holder of the power by its creator that are incident to a relationship of agency under § 1.01. It is given upon the creation of the duty or title or for consideration. It is distinct from actual authority that the holder may exercise if the holder is an agent of the creator of the power. Rest.3rd Agen. § 3.12. See also Hyatt, 95 F.3d at 300 (applying the Restatement's definition of a power given as a security)."

"Although the Restatement refers to a power given 'as security,' it is settled in this Circuit that the definition applies equally to a power coupled with an interest. See Hyatt, supra., 95 F.3d at 300, n. 5. Indeed, the only difference between power coupled with an interest and power given as security is the identity of the beneficiary of the power: when the power is coupled with an interest, the person holding the power (the agent) has an interest in the subject matter of the power and so is acting for himself as well as for the principal; while a power given 'as security' is given for the benefit of some third party (not the agent), who is entitled to rely on the agent's acts."

Further, even if Glover and Morris could have revoked their agency agreements with AREC that does not negate the 2007 Settlement Agreement entered into by AREC and defendants. Any revocation of an agency would have been between Glover and Morris, and [*9]AREC, and is not a defense or argument which may be raised by defendants as they are not parties to those agency agreements.

Accordingly, for the purposes of the rights and obligations incorporated into the settlements of Federal Action and the State Court Action, AREC's agency is irrevocable, and AREC is entitled to seek enforcement of the 2007 Settlement Agreement. Further, there is no dispute that in 2010 defendants ceased complying with the 2007 Settlement Agreement. Accordingly, AREC is entitled to summary judgment on its first cause of action for breach of the 2007 Settlement Agreement.

To the extent that defendants may have made royalty payments directly to Glover and Morris, defendants are not entitled to an offset against royalty payments owed to AREC pursuant to the 2007 Settlement Agreement. Defendants' recovery of any royalty payments made to Morris and Glover is properly asserted in their third-party action, and when the amount of royalties they owe to AREC is determined, defendants can pursue their indemnification claim in their third-party action. Contrary to defendants' arguments, however, the resolution of the third-party action is not a bar to the granting of summary judgment in AREC's favor. AREC is entitled to summary judgment on its claim that defendants breached the terms of the 2007 Settlement Agreement regardless of any payment defendants may have made to Glover or Morris. Notably, Morris and Glover both dispute that the payments they received from defendants were royalty payments.

AREC also seeks an award of attorney's fees and an additional 20% pursuant to the terms of the 2007 Settlement Agreement. Pursuant to paragraph 6.4 of the Federal Action Settlement Agreement which was incorporated into the 2007 Settlement Agreement, AREC, as the prevailing party on this motion, is entitled to an award of attorneys' fees (see Rubin aff, exhibit 9). The amount of legal fees to which AREC may be entitled will be referred at the close of the case to a special referee to hear and report.

With respect to AREC's entitlement to the additional 20%, pursuant to paragraph 6.2 of the 2007 Settlement Agreement, defendants argue that that provision of the 2007 Settlement Agreement is void because it is a penalty and is against public policy.

At the outset, the court notes that settlement agreements are favored by the courts and are not lightly set aside or changed (see Daniel v Long Is. Univ., 184 AD2d 350, 352 [1st Dept 1992]). There is no dispute that AREC and defendants entered into the 2007 Settlement Agreement which contained paragraph 6.2, and that the 2007 Settlement Agreement was the result of an arms-length negotiation. Notably, when paragraph 6.2 of the 2007 Settlement Agreement was discussed on the record before Justice Freedman, she opined that that provision was "a good idea" (see Rubin aff, exhibit 13).

The court notes that paragraph 6.2 of the 2007 Settlement Agreement is, in effect, a [*10]liquidated damages clause. A "liquidated damages provision is an estimate, made by the parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of breach of the agreement" (Truck Rent—A—Ctr. v Puritan Farms 2nd, 41 NY2d 420, 424 [1977]). Contracting parties may agree to such clauses provided they are neither unconscionable nor contrary to public policy (id.). The utility of liquidated damages clauses is manifest in those cases where calculation of the amount of actual loss is difficult, if not impossible; in such circumstances, the parties may agree in advance of the breach or default as to the amount of damages to be paid thereupon, rather than requiring proof and an assessment thereof in some future proceeding. (id.). In determining the enforceability of a liquidated damages clause, courts should consider "the surrounding circumstances and the apprehension of damage that existed in the minds of the parties at the time the contract was made." (36 NY Jur 2d, Damages, Section 156, at 267.)

On the other hand, liquidated damages provisions will not be enforced if they are against public policy to do so and public policy is firmly set against the imposition of penalties or forfeitures for which there is no statutory authority (see City of Rye v Public Serv. Mut. Ins. Co., 34 NY2d 470, 472-473 [1974]). Moreover, under no circumstances will liquidated damages be allowed where the contractual language and attendant circumstances show that the contract provides for the full recovery of actual damages, because liquidated and actual damages are mutually exclusive remedies under New York law (see X.L.O. Concrete Corp. v. John T. Brady & Co., 104 AD2d 181, 184 [1st Dept 1984], affd 66 NY2d 990 [1985]).

However, contrary to defendants' arguments, the 20% is not an unenforceable penalty; it is an enforceable liquidated damages clause. Paragraph 6.2 is an acknowledgement by the parties to the 2007 Settlement Agreement of the difficulty faced by AREC and Glover and Morris of discovering if defendants received a new a license request or a royalty payment. Indeed, there is no dispute that Glover, Morris, and AREC have been litigating the recovery of royalty payments with defendants since at least 2002, if not earlier. Moreover, AREC only discovered that defendants breached the terms of the 2007 Settlement Agreement by issuing a license for the use of the composition "The Message," when it learned of the DirecTV nationwide ad campaign using that song. Thus, while the 20% bonus is an incentive to defendants to perform, it is also an acknowledgement that, if defendants fail to comply with paragraph 6.2 of the 2007 Settlement Agreement, there may be other outstanding royalties of which AREC has no knowledge. This is borne out by the fact that in this litigation, AREC claims to have learned that it is due $242,050.24 as part of the Songwriters' share, not because defendants disclosed the license agreements and royalties collected, but only from documents it received from defendants' third-party administrator of domestic royalties, UMPG (see Rubin aff, exhibit 19).

Finally, AREC claims that it has established as a matter of law that it is entitled to partial [*11]summary judgment for $771,978.80 in unpaid royalties and pre-judgment interest.^[FN2] This court disagrees. AREC contends that using the documents it received from UMPG, AREC has determined that it is owed $242,050.24 in unpaid royalties from July 2013 through December 2017 (see NYSCEF No. 122 at 18 ¶¶ 90-91). AREC then uses that figure for unpaid royalties from 2013-2017 to arrive at an average per-period royalty amount; assumes that the Songwriters earned that same per-period amount in royalties for each period from January 2010 through June 2013 (for which royalty statements are not available); and thereby calculates a total figure for royalties earned for the 2010-2013 timeframe (see id. at ¶¶ 93-94). Combining these two figures and incorporating the 20% bonus, AREC arrives at a figure of $516,373.83 in total unpaid royalties. Adding that amount in unpaid royalties, plus $255,604.97 in pre-judgment interest, AREC claims a total sum in damages of $771,978.80. (See id. at ¶¶ 95-96.)

AREC's sole record support for the 2013-2017 figure, however, is a five-page chart that AREC's counsel compiled based upon hundreds of pages in royalty statements (see NYSCEF No. 141), rather than the royalty statements themselves. And AREC provides no record support at all for its assertion that the amount of unpaid royalties earned in each period from 2010-2013 may properly be deemed equal to the average royalties earned from 2013-2017. This showing is not sufficient to entitle AREC to partial summary judgment on damages.

To be sure, as AREC contends (see NYSCEF No. 142 at 18 n7), the best evidence rule does not always require the introduction of the original documents. In appropriate circumstances a short summary document, such as a chart, may be admissible where it is based upon underlying materials that are too voluminous to be manageable and where both sides have access to the underlying materials (see Sager Spuck Statewide Supply Co. v Meyer, 298 AD2d 794, 795 (3d Dept 2002]). Here, though, the problem is not merely one of best evidence, but also of foundation. AREC does not meaningfully explain how its counsel derived the numbers in the chart from the underlying royalty statements—and thus how this court can be assured as a matter of law that the numbers are accurate for damages purposes. (See NYSCEF No. 122 at 18 ¶¶ 89-92, No. 142 at 17-18, No. 166 at 8, No. 168 at 6-7.) And even if AREC's papers provided a sufficient basis for the 2013-2017 numbers, that would still leave the problem of the unsupported 2010-2013 figure.^[FN3]

These shortcomings are only exacerbated by the fact that defendants hotly contest the accuracy of AREC's calculations for the 2013-2017 period. Among other things, defendants assert that AREC simply misunderstood UMPG's internal practices in generating royalty statements, leading AREC at a minimum to improperly double the amount of royalties owed for 2013-2017. (See NYSCEF No. 172 at 2-4.)

Given these substantial lingering factual questions and disputes about the amount owed to AREC in unpaid royalties and interest, partial summary judgment on damages is not appropriate.

Accordingly, it is

ORDERED that the branch of AREC's motion for partial summary judgment seeking a declaration that defendants breached the 2007 Settlement Agreement by failing to pay royalties since 2010, and that AREC is entitled to a 20% bonus, is granted; and it is further

ORDERED that the branch of AREC's motion for partial summary judgment seeking an award of attorneys' fees pursuant to paragraph 6.2 of the 2007 Settlement Agreement is granted, with the amount of this award to be determined at the close of the case; and it is further

ORDERED that the branch of AREC's motion for partial summary judgment seeking an award of damages in a specified sum is denied; and it is further

ORDERED that defendants' cross motion for summary judgment dismissing this action is denied; and it is further

ORDERED that the parties shall confer and shall prepare a joint request for a status conference with this court to discuss how they intend to proceed going forward in light of this decision and order, as set forth in the Remote Conference Protocol available on this court's website, http://ww2.nycourts.gov/courts/1jd/supctmanh/index.shtml.